Berkeley will refrain from investing
2022.12.09 06:39
Berkeley will refrain from investing
Budrigannews.com – The Berkeley Group stated that it would delay land purchases in the near future to save money as the high-end homebuilder faces a decline in bookings and an increase in cancellations as Britain’s housing sector faces pressure.
As a result of rising interest rates and a disastrous mini-budget in September, British homebuilders are facing falling house prices and weak demand.
Barratt, Persimmon, and other significant British homebuilders (LON:) also, Taylor Wimpey (LON:) have also raised growing concerns about a slowdown.
“It has been good to see a little bit of stability return in the mortgage markets,” Chief Executive Officer Rob Perrins told Reuters. “If the rates can get below 5%, we are back to an environment where buying is certainly as good value as renting.”
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Within a few days of former finance minister Kwasi Kwarteng’s mini-budget containing unfunded tax cuts jolting bond markets, a key rate on mortgage borrowing costs in the UK had risen to 6.07%, its highest level in nearly 14 years.
After reporting a 2% decrease in half-year profit to 284.8 million pounds, Berkeley, which focuses on brownfield projects that redevelop used land, maintained its 2023 profit outlook.
The company stated that cancellation rates have increased to approximately 20%, up from approximately 13%, and that the value of underlying sales has decreased by approximately 25% since the end of September compared to the previous five months.
During the first half that ended on October 31, the business did not acquire any land.
Berkeley, which has locations in London, Birmingham, and the South of England, has reiterated its intention to pay shareholders 283 million pounds (or £2.60 per share) annually through 2025.
It said it expects pre-tax earnings of at least 1.05 billion pounds ($1.29 billion) for the 2024 and 2025 fiscal years, down from 1.25 billion pounds earlier. It is aiming for a profit of 600 million pounds this year.
According to Barclays (LON:), “We expect this level of medium-term earnings conviction to prove specific to Berkeley in the sector in the near term, given the unique visibility provided by the length and strength of its order book.” Berkeley’s order book is long and strong. researchers in a note.
Berkeley stated that the amount of cash due on forward sales at the end of the half year increased to 2.33 billion pounds from the previous year’s 2.17 billion pounds.
